Common investing mistakes women make

Here is the irony: According to many studies, women are actually BETTER investors than men, but, statistically, we save and invest far less than dudes — even though we NEED more money over our lifetimes. After all:

Women live longer than men

Women are far more likely to have the expense of caring for children and loved ones

The pay gap means we will reap more from Social Security in retirement

What is going on? There are some common investing mistakes women, in particular, make— some of them are strategic mistakes, and others are internal, mindsets that hold them back.

Here are some of the most common investing mistakes women — and single moms in particular — are prone to make.

1. Believing money is better served spent on our kids or families than our own futures

Even though women need more money than men, collectively — we live longer, are more likely to be tasked with raising kids alone, caring for aging and sick loved ones, and more reliant on Social Security despite having contributed less to it over our lifetimes thanks to the pay gap — we are far, far less likely to save and invest.

Part of this wealth gap is because of our misguided attitudes about family and money. In an Allianz survey, nearly half of single moms said that saving for their children’s education is their No. 1 greatest motivation for developing a long-term financial plan — above saving for retirement.

Compare that with just 26 percent of other modern families who say the same, according to the survey by financial giant Allianz. The best gift you can give your children now is your financial security. In the future, you will be less likely to be a burden on your children — people who can finance college any number of ways because they will then be adults.

When you prioritize your own financial well-being today, you set a fantastic example for your children, and communicate to them you do not intend to be a burden.

2. Thinking a man is a financial plan

Maybe one day you’ll couple with a man who is at least, if not more, successful than you, which will bolster your financial security.

Even then, you need to take care of yourself, and your finances, and build wealth, and a life, as an independent, adult woman. Because you are, and you can.

3. Failing to diversify

The best indicator of high return on your investments is taking a calculated risk and diversifying. That means that you own lots of different types of investments, across all types of sectors. As a non-financial professional, it can be debilitating to try to figure out how to do that.

The best way is through buying mutual funds, in my opinion. If you’re unfamiliar with what these are, you may want to consider looking into something like Betterment which can help you invest according to your risk tolerance.

4. “I don’t invest in the market because I don’t understand stocks and bonds.”

You know what? I don’t deeply understand stocks and bonds either.

You know what else I don’t deeply understand? The tax code — so I hire an accountant.

I also don’t how to grow natural fibers, make cloth and sew, so I shop for my clothes and linens.

I’m not much of one to understand how digital electronics function, much less are manufactured, so I leave that jazz to Apple, Sony and Bose.

You are not Ma Ingalls on the prairie where everything is DIY. You live in 2018 where almost everything in your life is outsourced to someone who knows how to do it better. Your investments are no exception. Pay a low fee for a mutual fund, which means you pay a small amount of money to an expert who creates a financial product — a fund — that is diversified and will likely help you meet your goals.

5. “My home is my retirement”

First, read #4 here. A house is sometimes an investment, but if that is all you have for retirement, it could not be less diversified — it is parking all of your future in one zip code, in one property, in one market. Far, far, too much risk to be even close to reasonable. Plus, you need to live somewhere.

Let’s say that when you are 67 you decide to retire, but that year, the U.S. real estate market tanks, and your town floods. Everyone in your neighborhood is also trying to sell their soggy homes, with the intention of renting elsewhere. House prices plummet, while rental prices skyrocket.

Even if you do sell your home for a modest sum, that will not go far. Stay or go, you are stuck.

6. “I don’t have much in the market, but I do own a rental property and a business — and that is how my grandparents made a lot of money”

Way to go with the rental property and the business! And good for your grandparents and their success.

However, what I see is a very dangerous portfolio: One with exactly two assets and both are in the same location, in the same economy. Read above — you absolutely cannot afford to load all the risk into so few investments. The very best, least risky, least expensive and easiest way to securely invest in a safe, diversified way, is through mutual funds in the stock market. This is a proven fact based on portfolios of millions of investors — not one couple who you happen to know.

This post is a great place to get started understanding why the market is where you should absolutely invest first. Then, rental properties and other business are fantastic, too!

7. “I am so far behind in saving for retirement, and I could only save such a small sum each month, it isn’t worth even trying”

The beautiful thing about investing with consistency, and wisely diversified, is that even small sums, when deposited and invested regularly, do grow into significant amounts.

Check this out … if you invest $100 each month, and average 8 percent returns, after 30 years (and think about how tiny $100 will be to you in 10 or 20 years — you’ll likely be able to save much more by then) …. if you start at $0 today, in 30 year’s this scenerio would mean you’d have $164,951!

There are lots of ways to save and invest, but the first step is to actively invest in the market with regular contributions, take control of your financial future, and not waiting for a man, windfall or miracle to save you! Small acts of dedication go a very long way.

8. Underestimating the power of working.

When you work, it is not just about your paycheck every two weeks. Working builds your career, contributes to social security, keeps the momentum going on all your investment and savings plans (including any employer match), and is the greatest insurance for financial security.

Experts warn stepping off your career path for as little as two years means you will be forced to essentially start your career anew since technology changes every single industry so quickly.

Plus, studies find time and again that when moms work, they are happier, their children are more successful in their careers, and marriages are more likely to survive long-term.

Plus, when you work and earn, the pay gap narrows and the world benefits from your unique talents.

What investing mistakes have you made along the way? How did you overcome those? Share in the comments!

Emma Johnson

Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post’s ‘Must Read” list.

Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.

A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.

About Emma Johnson

Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list. Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer. A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.

I wonder whether we should plan to rely on social security at all? Unless there are a lot of changes, I don’t think most of us will get much from it. Is there any employment strategy that would let us take the amount of money we are putting into social security and save it to our own retirement fund?

Hi Emma! Great article and great to see you doing so well. I agree with you on mutual funds and I get mine through Vanguard, although there are many reputable companies. I did choose an index fund and a retirement target date, but I also enjoyed getting one “wild card” actively managed fund where I chose an area I liked and knew. Some years that fund beats the index, some years it doesn’t, but it adds a little intrigue beyond the “index fund only” strategy.

With so many resources out there investors.com, http://www.millionaireminter.com, kiplingers.com anyone can be a better investor or learn successful financial strategies. Much of it is just ensuring you are taking advantage of matching funds and tax advantaged retirement accounts and getting started as soon as possible. Budgeting with personal finance software (free), automatically investing, investing in low cost index funds, there are so many ways to simplify the investment plan and still make a ton of money over time, that everyone should become more knowledgable and place a priority on this. I would also think that working single mom’s would want to show their kids these things and teach them through their own actions how to take control financially and secure your future. Great article!